ADP Employment Survey graph

Here is Automatic Data Processing's measurement of the monthly job losses during the recession. Compare this with Friday's graph of the government's job loss numbers.


Unlike last month, ADP and the government are in close agreement this month. ADP says 473,000 job losses in June and the government says 467,000 job losses.

Happy Independence Day!

Could you pass the U.S. citizenship test? I scored 100%. How well can you do?

Job losses jump

Job losses and the unemployment rate are key signs of economic decline or recovery. There is mixed news on the employment front. Job losses jumped unexpectedly, but the rate of increase in the unemployment rate slowed:

The battered U.S. labor market took a step backwards last month as employers trimmed more jobs from their payrolls in June, according to a government report Thursday.

There was a net loss of 467,000 jobs in June, compared with a revised loss of 322,000 jobs in May. This was the first time in four months that the number of jobs lost rose from the prior month.

The June job losses were also far worse than the forecast of a loss of 365,000 jobs by economists surveyed by Briefing.com.

The unemployment rate rose for the ninth straight month, climbing to 9.5% from 9.4%, and hitting another 26-year high. Economists had been expecting that the unemployment rate would hit 9.6%.

Nearly 3.4 million jobs have been lost during the first half of 2009, more than the 3.1 million lost in all of 2008.

Job losses since the recession began:

The unemployment rate over the past five years:

The reason they can disagree is because they are measured differently. The job loss number is probably more reliable than the unemployment rate.

Leading Economic Index graph

The Conference Board Leading Economic Index attempts to forecast upcoming changes in the economy. Notice the slight uptick over the past two months.

Economist and blogger Rebecca Wilder notes more signs of recovery here and here.

The Democrats' health care hypocrisy

When Bill Clinton ran for president back in 1992, he used Hawaii as an example of a successful health care system that was a role model for the rest of the country. Here is what he had to say during the October 15, 1992 presidential debate:

Now, let me say, some people say we can't do this but Hawaii does it. They cover 98% of their people and their insurance premiums are much cheaper than the rest of America...

Now see Hawaii Congressman Neil Abercrombie's current description—from a recent email—of the poor shape of Hawaii's health care system, and thus the need for a national plan:

It's no secret. There's a healthcare crisis in Hawaii, and in the rest of the country. Medical bills are getting larger and more families are facing bankruptcy. Though most people over 65 are covered by Medicare, one of every four people in Hawaii under 65 has no health insurance, and probably has not seen a doctor in the last two years. Not only are families burdened by the costs, but healthcare providers are in dire straits, too. Our community hospitals will have to come up with $62 million this year to stay in business.

I wonder how long the U.S. will have its new, wonderful universal health care system before it becomes a crisis that needs to be fixed with more government involvement.

You should also know that since 1974 in Hawaii, employer-sponsored health care kicks in when employees work at least 20 hours per week. The result? For many low wage jobs, employers only hire for 19 hours per week. This leaves many low wage workers unable to find a full-time job. As someone who used to be a low wage worker in Hawaii, I can tell you that given the choice between universal health care or the ability to afford a roof over my head, I'd much prefer the latter. (Managing two part-time jobs is difficult, especially when they have flexible hours.)

Treasury bond yields are predicting an economic recovery

Treasury bond yields predict a near-zero probability that we will be in a recession 12 months from now:


When the Treasury yield curve is steep (long-term rates much higher than short-term rates), it suggests a strong economy going forward. When the Treasury yield curve is inverted (long-term rates lower than short-term rates), it suggests a recession ahead.

In late 2006 and early 2007, the yield curve became inverted. At the time, many pundits suggested that because of unique conditions, it may be a false positive. These pundits turned out to be very wrong. Now when pundits suggest that because of unique conditions, the currently steep yield curve may be a false positive, I am not inclined to believe them.

Don't argue with the yield curve.

Recession expected to end by Q4 2009

Based on the "US Economic Growth by Quarter" bets at Intrade.com, here are the probabilities that real GDP growth will be positive in a given quarter. It looks like people are expecting the recession to be over by the fourth quarter of this year, give or take a quarter.

The number of new job losses is slowing

The number of new job losses per month is slowing, but the economy is still losing jobs.

This graph shows new job losses per month, not cumulative job losses:

Even when job gains per month rise above zero, the unemployment rate is likely to keep increasing, because it takes about 150,000 new jobs per month just to keep up with population growth.

The current recession in context

The ultra-bearish are frequently claiming that another Great Depression is right around the corner. Many of the most pessimistic economic commentators have almost gleefully been comparing the current recession to the Great Depression. To give readers a sense of how not bad the current recession is, here is the decline in GDP of several major recessions vs. the Great Depression:

I have occasionally compared the current recession to the early 1980s recession (1981-1982), arguing that the early 1980s recession was worse. The graph above makes the current one look worse. However, the graph above seems to be a peak-to-trough measurement. The early 1980s recession was the fourth in a series of recessions in which the unemployment rate didn't fully recover before the next recession hit, resulting in a peak unemployment rate that was significantly higher than the current unemployment rate. (And before the conspiracy theorists out there claim we can't compare the current unemployment numbers to those of previous decades, you're wrong.)

That said, it seems very likely that the current recession will be the longest since the Great Depression. Even though it looks like the current recession may be on its last legs, the unemployment rate may very likely reach the second highest level since 1948, and could possibly go higher than that of 1982. In the latter case, it would unambiguously be the worst recession since the Great Depression —But it would be a far cry from what our grandparents and great-grandparents experienced during the 1930s.

Note: I notice that Cornell University (my parents' alma mater, BTW) law professor William Jacobson linked to a previous unemployment post of mine. I agree with his thoughts, so I encourage you to read his post.

There's a good reason why the Detroit automakers are failing

Harvard economics professor Greg Mankiw is car shopping and has the following thoughts on the Detroit automakers:

I got a copy of the Consumer Reports auto issue (April 2009).

Page 15 was particularly enlightening. There, in their "Automakers report cards," Consumers Union summarized their findings for each of fifteen major car companies.

Dead last was Chrysler. CU recommended zero percent of the Chrysler vehicles they tested. That's right—zero. Second to last was General Motors. CU recommended 17 percent of GM models. By contrast, most other companies had half or more of their models get the thumbs up. Honda was the top ranked brand; CU recommended 95 percent of its models.

Is it any surprise that Chrysler and GM are now in the process of going out of business? From the perspective of the Consumer Reports advice, it looks like their business model was to count on the ignorance of the buying public about the quality of their products. Their bankruptcy should perhaps be viewed as a success of the market system.

I subscribe to Consumer Reports, and I had a similar thought when I read that issue, but didn't think to blog about it. Here's a scan I made of page 15. Ford is fourth from the bottom. Click on the image to see a full-sized version:

Why are we spending billions of taxpayer dollars to bail out these underperforming automakers again? Oh yeah, unions vote Democratic.

It's time to repeal the Patriot Act

The Patriot Act can take away American citizens' constitutional rights.

Democrats are hurting the poor

The public school monopoly keeps millions of the inner-city poor trapped in inter-generational poverty, because they can't get a decent education. The Democratic Party opposes systemic changes to this failing system.